Analysis of Bad Debts
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company gross accounts receivable. The relationship between the allowance and the balance in receivables should be relatively constant unless there is a change in the economy overall or a change in customer base.
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- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2020
- Debt to Equity since 2020
- Total Asset Turnover since 2020
- Price to Operating Profit (P/OP) since 2020
- Analysis of Revenues
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The allowance for credit losses demonstrates a fluctuating pattern over the observed period. Accounts receivable, gross, exhibit a consistent upward trend, while the allowance as a percentage of gross accounts receivable declines.
- Allowance for Credit Losses
- The allowance for credit losses was not reported for the year ending December 31, 2021. It stood at US$10.1 million in 2022, increasing slightly to US$10.5 million in 2023. Values for 2024 and 2025 are currently unavailable.
- Accounts Receivable, Gross
- Accounts receivable, gross, increased significantly throughout the period. Starting at US$190.923 million in 2021, it rose to US$268.446 million in 2022, then to US$375.284 million in 2023. This growth continued, reaching US$575.048 million in 2024 and US$1,042.065 million in 2025.
- Allowance as a Percentage of Accounts Receivable, Gross
- This ratio decreased from 3.76% in 2022 to 2.80% in 2023. A value for 2021 and 2024/2025 is not available. The decline suggests that, relative to the increasing gross accounts receivable, the company is recognizing a smaller proportion of potential uncollectible amounts. This could indicate improved credit quality of customers, more effective collection efforts, or a change in the company’s assessment of credit risk.
The consistent growth in gross accounts receivable, coupled with the decreasing percentage of the allowance, warrants further investigation into the company’s credit policies and collection practices. While a decreasing percentage may appear positive, it is crucial to ensure the allowance remains adequate to cover potential bad debts, especially given the substantial increase in outstanding receivables.